Analysis & Opinion

(Reuters) - If MF Global Holdings Ltd Chief Executive Jon Corzine were pushed out of his company under normal circumstances he'd be entitled to $9 million in severance, but with his company now in bankruptcy he is unlikely to receive a full payment, legal experts said.

Chief Operating Officer Bradley Abelow is also normally entitled to $9 million if terminated without cause, according to a July proxy filing. Randy MacDonald, the company's retail operations chief, would pocket another $8.9 million, according to the proxy.

MF Global declared bankruptcy on Monday, hours after talks to sell itself to Interactive Brokers Group Inc broke down, according to a source close to the matter.

The text of the federal bankruptcy code suggests that the severance deals reserved for Corzine, MacDonald and Abelow would be banned.

Section 503 bars all severance payments to insiders unless two provisions are met. First, such payments must be generally available to all full-time workers. Second, the amounts must not exceed 10 times the average amounts awarded to nonmanagement workers in the same calendar year.

That means the average nonmanagement severance package doled out by MF Global in 2011 would have to be at least roughly $900,000 in order for Corzine, MacDonald and Abelow to be eligible to receive full payouts.

"My guess is, they aren't going to get much," said Robert Miller, a professor at Villanova University School of Law.

That is not to say the matter won't be open for debate, said Charles Elson of the University of Delaware's Lerner College of Business & Economics.

"Nothing is sacrosanct in bankruptcy and I'd rule nothing out," said Elson, who chairs the college's Weinberg Center for Corporate Governance. "When you file for bankruptcy, you really go into the twilight zone. It's hard to say with certainty what comes out of it."

It is possible MF Global and its creditors could come to terms on an acceptable severance for its insiders.

Judge Martin Glenn, who will preside over MF Global's bankruptcy case, approved a similar stipulation in September, when bookseller Borders Group Inc sought to pay four employees a total of $500,000 in severance.

In making that request, which also relied on Section 503 of the bankruptcy code, Borders and its creditors' committee came to a consensual agreement on the amount of severance allowed under Section 503, then gave other parties a chance to object.

The bankruptcy case is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, 11-15059.

(Reporting by Nick Brown in New York. Additional reporting by Jonathan Stempel; Editing by Gary Hill)